17 June, 2017

Varoufakis explains why economics is not science

Russell
Brand discusses with Yanis Varoufakis what happens when you take on
the political, financial and media elite, and how radical reform can
occur. Through accounts of his confrontations with the IMF, European
institutions and the German government they examine where true power
lies and how it is wielded.

In a
particular part of the interview, Varoufakis explains simply why
economics is not science:

I call
it organized religion with equations, superstition. The only way to
become free of superstition is through overcoming. But you need to
study. I've always pissed off my academic colleagues and other
economists who actually believe that is real science what they are
doing.

Our
mathematical models of the weather can be judged by objective
reality. If I am a meteorologist and come up with a prediction that
tomorrow there is going to be a heatwave in Leicester square, all we
have to do is to wait until tomorrow to see if I'm right or wrong.
The weather will either confirm or junk my theories about it.

And by the
way, this is exactly the process of how real science progress. Try –
fail - come with an improved idea, and so on. Real scientists abolish
old theories even if they work well with new ones that explain better
the nature, the world, etc.

Varoufakis
continues:

Let's
say that I have the same kind of computer model and actual machine
and data mining that the meteorologist does, but instead of using it
to predict the weather I use it to predict the stock exchange. And
suppose that I was somebody very highly respected as a predictor of
stock exchange changes and let's say that today, I were to predict
that tomorrow is going to be a major crash in the stock exchange.
There might be because I predicted it! In society and in the economy,
our beliefs about the phenomenon under study are part of the
phenomenon under study.

The
last paragraph above depicts soundly why mainstream economics are far
from the concept of modern science. The 'gurus' of the dominant
economic system 'teach' us how economy should be treated, based on
mathematical models that assume standard conditions that, essentialy,
do not exist in the real world. This kind of peculiar 'determinism'
in economics is already considered obsolete in other scientific
fields.

In
Quantum Mechanics, for example, Heisenberg's uncertainty principle
not only acknowledges that the observer affects the final situation
of a physical system but also embeds this interference
mathematically. As a consequence, the final situation of a physical
system can be determined only in statistical terms.

Mainstream
economics, dominated by the neoliberal perception, is full of
assumptions that are not applicable in the real world, yet being used
to justify the satisfaction of the interests of the elites.

Almost
everywhere, neoliberal policies imposed through IMF have brought
unprecedented disaster. Despite the obvious failure, financial
technocrats assume that all cases are similar, imposing the same
recipe in every region. Their models are full of assumptions in every
level and that's why they fail miserably. Yet, despite the obvious
disaster, the neoliberal priesthood demands from societies to adopt
its models through simple faith.

Which
shows that the only and real target of the mainstream economics, is
simply retain the domination of a small elite on the top of the
economic hierarchy, at the expense of the majority of the people.